It costs £60 if bought with the supermarket’s loyalty points scheme and features a ‘Tesco launcher’ button to
access online grocery shopping and the supermarket chain’s other
businesses including clothing, banking and mobile phone services.

Tesco bosses said the Hudl was aimed at families who could not afford higher priced tablets or who felt intimidated by existing technology.

With its low price point, it is thought the new smartphone could have a similarly broad appeal.

Tesco is also set to release its second iteration of the Hudl in September.

The announcements come as Tesco launched a massive counter-offensive against pound shop stores as it battles to stem the loss of customers to budget outlets.

The nation’s biggest retailer has begun opening heavily-promoted 'pound shop' areas within its stores in a bid to take on thriving Poundland and other low-cost chains.

The new zones have so far been introduced to more than 60 Tesco stores, and the retailer plans to increase this figure to nearly 300 over the next few weeks.

A range of products will be sold for as little as 50p, including items such as health products, kitchen tissues, washing-up liquid, pet food and detergents.

The Tesco launch highlights just how severely the success of the pound shops is hitting the profits of established supermarket giants in Britain.

In recent years the no-frills budget shops have become a dominant force in UK retailing, with cash-strapped shoppers flocking to them on a regular basis.

Last month it was revealed that Tesco's profits had fallen for the second year running as its rivals continue to eat into its market share, which is at a ten-year low.

Britain's biggest supermarket posted a six per cent fall in its pre-tax profits to £3.3billion in the past 12 months, down from £3.45billion a year earlier.

Tesco is still by far the biggest UK supermarket with 28.6 per of market share, but this is down from 29.7 per cent a year ago.